S. Farm Bureau Cas. Ins. Co. v., Shelter Mut. Ins. Co. , 506 S.W.3d 915 ( 2016 )

Cite as 2016 Ark. App. 563
ARKANSAS COURT OF APPEALS
DIVISION III
CV-16-306
No.
OPINION DELIVERED: NOVEMBER 30, 2016
SOUTHERN FARM BUREAU
CASUALTY INSURANCE COMPANY
APPELLANT APPEAL FROM THE ASHLEY
COUNTY CIRCUIT COURT
[NO. 02CV-15-82-3]
V.
HONORABLE ROBERT BYNUM
GIBSON, JR., JUDGE
SHELTER MUTUAL INSURANCE
COMPANY AND TOMMY ROBERSON REVERSED ON DIRECT APPEAL;
APPELLEES CROSS-APPEAL RENDERED
MOOT
ROBERT J. GLADWIN, Chief Judge
The Ashley County Circuit Court considered competing motions for summary
judgment from Southern Farm Bureau Casualty Insurance Company (Farm Bureau) and
Shelter Mutual Insurance Company (Shelter) and ordered that they were equally liable for
uninsured motorist (UM) coverage. On appeal, Farm Bureau argues that the trial court
erred in holding that there was coverage under its policy, and on cross-appeal, Shelter
contends that, while the trial court correctly determined that there was coverage under the
Farm Bureau policy, it erred in finding the coverage should be divided equally instead of by
pro rata distribution as set forth in Shelter’s policy. We reverse on direct appeal, thereby
holding that the issue on cross-appeal is moot.
Cite as 2016 Ark. App. 563
I. Facts
Tommy Roberson was driving a vehicle owned by a third party when it was rear-
ended by an uninsured vehicle, forcing his car into the back of the vehicle in front of him.
Roberson was insured by Farm Bureau, and the car he was driving was insured by Shelter.
Having been injured in the accident, Roberson filed a lawsuit seeking damages from both
insurance companies under their UM provisions. Shelter settled the matter with Roberson,
obtained a release for itself and Farm Bureau in exchange for $6000, and left it for the trial
court to decide the respective liabilities of the two insurers.
Shelter filed a motion for summary judgment claiming that both it and Farm Bureau
provided UM coverage for the accident. Shelter argued that its policy provided that when
a claim is covered by UM insurance by another company, then Shelter’s coverage would
apply only as excess over all other such insurance. Further, Shelter’s policy coverage would
be applied in a pro rata manner if it were impossible to reconcile the provisions of other
applicable policies. Shelter’s policy provides uninsured-motor-vehicle-liability coverage in
Part IV-Coverage E as follows:
Subject to all conditions, exclusions, and limitations of our liability, stated in this
policy, we will pay damages that an Insured, or an Insured’s legal representative, is
legally entitled to recover from the owner or operator of an uninsured motor vehicle
because of an occurrence that arose out of the ownership or use of that uninsured
motor vehicle.
...
Insured means an individual included in one of the following categories:
CATEGORY A:
(a) You;
(b) Relatives; and
(c) Individuals listed in the Declarations as an “additional listed insured” who do not
own a motor vehicle, and whose spouse does not own a motor vehicle.
CATEGORY B:
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Any individual who is not included in Category A, while he or she is using the
described auto with permission or general consent.
...
If a claim covered by Coverage E of this policy is also covered by uninsured motorist
insurance issued by a company other than . . . Shelter . . . the coverage under this
policy will apply only as excess over all such other insurance. Coverage E will then
apply only in the amount that its limit of liability exceeds the combined limits of all
such other uninsured motorist insurance.
If it is impossible to reconcile the provisions of all applicable policies to determine
the order in which their benefits apply, the limits of Coverage E will be prorated
with all such other policies, based on the applicable limits of each, up to the
combined limits of all such policies.
Shelter argued that the issue was whether its UM policy should be “applied to the accident
as excess or at least in a pro-rata manner.”
Farm Bureau’s UM policy states as follows:
If you sustain bodily injury while occupying an auto not owned by you or any
covered person, this coverage will be:
a. excess over any uninsured motorist coverage which applies to the auto as primary
coverage; but
b. only for the amount by which this coverage exceeds the primary coverage.
Shelter claimed that Farm Bureau’s argument was that its policy was excess over the Shelter
policy, while Shelter maintained that its liability was pro rata due to the irreconcilable
language between the two policies. Shelter argued that the issue turned on the
interpretation of the two polices. It asked the trial court that, if it could not find that
Shelter’s coverage was excess, it enter an order requiring Farm Bureau to reimburse Shelter
for its pro rata share of the accident.
Farm Bureau filed its motion for summary judgment claiming that primary coverage
follows the vehicle and not the person. Therefore, Farm Bureau asked that Shelter’s claims
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be dismissed and/or for a declaration that Shelter’s UM coverage was primary. In support
of its argument that it held no liability for coverage, Farm Bureau relied on Arkansas Code
Annotated section 23-89-403 (Repl. 2014), the UM statute, and section 23-89-215, which
provides that an automobile’s liability-insurance policy is primary when the motor vehicle
is driven by an insured or any other person not excluded from coverage under the policy,
with the permission of an insured. Farm Bureau claimed that, because UM coverage is
required along with liability insurance on an automobile registered in Arkansas, it is implied
in the statute that UM coverage, like liability insurance, follows the automobile.
Farm Bureau relied on Shelter Mutual Insurance Company v. Williams, 69 Ark. App.
35, 9 S.W.3d 545 (2000) (Shelter Mutual), for the proposition that, under a standard
automobile policy, primary liability is generally placed on the insurer of the owner of the
automobile involved, and the policy providing the nonownership coverage is secondary.
Farm Bureau argued that the issue of primacy is determined by who insured the vehicle
actually involved in the accident. Thus, Farm Bureau urged the trial court to find that
Shelter held primary coverage, thereby negating Farm Bureau’s liability under the terms of
its policy, as the total amount paid was less than Shelter’s policy limits.
A summary-judgment hearing was held on January 11, 2016. The trial court found
that the policies provided by Shelter and Farm Bureau both provided UM coverage for the
benefit of Roberson and should equally share in the settlement that was paid to him by
Shelter. Farm Bureau was ordered to reimburse Shelter in the amount of $3000 for its one-
half share of the settlement. The order was filed on February 1, 2016, and this appeal and
cross-appeal timely followed.
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II. Statement of Law
A circuit court grants summary judgment when a party is entitled to judgment as a
matter of law. Humphries v. Nationwide Mut. Ins. Co., 97 Ark. App. 125, 127, 245 S.W.3d
156, 158 (2006) (citing Lewis v. Mid-Century Ins. Co., 362 Ark. 591, 210 S.W.3d 113
(2005)). Whether the language of the policy is ambiguous is a question of law to be resolved
by the court. Harasyn v. St. Paul Guardian Ins. Co., 349 Ark. 9, 75 S.W.3d 696 (2002). An
issue involving a question of law is reviewed de novo and is given no deference on appeal.
Travelers Cas. & Surety Co. of America v. Cummins Mid-South, LLC, 2015 Ark. App. 229,
460 S.W.3d 308. If the language of an insurance policy is unambiguous, we give effect to
the policy’s plain language without resorting to the rules of construction, but if the language
is ambiguous, we construe the policy liberally in favor of the insured and strictly against the
insurer. Humphries, supra. Policy language is ambiguous if there is doubt or uncertainty as to
its meaning and it is fairly susceptible to more than one reasonable interpretation. Id.
This court stated that
[i]n Arkansas, insurance policies are to be interpreted like other contracts.
Agricultural Ins. Co. v. Ark. Power & Light Co., 235 Ark. 445, 361 S.W.2d 6 (1962).
The language in an insurance policy is to be construed in its plain, ordinary, and
popular sense. Tri-State Ins. Co. v. Sing, 41 Ark. App. 142, 850 S.W.2d 6 (1993).
Contracts of insurance should receive a practical, reasonable, and fair interpretation
consonant with the apparent object and intent of the parties in light of their general
object and purpose. First Financial Ins. Co. v. Nat’l Indemnity Co., 49 Ark. App. 115,
898 S.W.2d 63 (1995). If there is no ambiguity, and only one reasonable
interpretation is possible, it is the duty of the courts to give effect to the plain wording
of the policy. See Western World Ins. Co. v. Branch, 332 Ark. 427, 965 S.W.2d 760
(1998).
Foster v. Farm Bureau Mut. Ins. Co., 71 Ark. App. 132, 133, 27 S.W.3d 464, 465 (2000).
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The law regarding construction of an insurance contract is well settled. Once it is
determined that coverage exists, it then must be determined whether the exclusionary
language within the policy eliminates the coverage. Norris v. State Farm Fire & Cas. Co., 341
Ark. 360, 16 S.W.3d 242 (2000). Exclusionary endorsements must adhere to the general
requirements that the insurance terms must be expressed in clear and unambiguous language.
Castaneda v. Progressive Classic Ins. Co., 357 Ark. 345, 166 S.W.3d 556 (2004).
III. Competing Insurance Clauses
Arkansas Code Annotated section 23-89-215 provides that the liability-insurance
policy covering a motor vehicle is primary when the motor vehicle is driven by an insured
or any other person with the permission of an insured. Arkansas Code Annotated section
23-89-403(a)(1) provides that no automobile-liability insurance may be issued in this state
unless coverage is provided for the protection of persons insured thereunder who are legally
entitled to recover damages from owners or operators of uninsured motor vehicles.
Shelter argues that the trial court correctly determined that Farm Bureau’s policy
issued to Roberson provided UM coverage for the accident. Shelter maintains that Arkansas
law does not mandate that Shelter has primary coverage, arguing that it cannot be inferred
from reading the statutes cited by Farm Bureau that the legislature intended that UM
coverage should be treated the same as liability coverage and follow the automobile. Shelter
asserts that, because section 23-89-215 does not specifically state that it applies to UM
coverage and section 23-89-403 contains no language that sets forth a priority of coverage,
then the priority of coverage rests with the terms of the insurance policies at issue, not the
statute governing the issuance of UM coverage. Shelter contends that section 23-89-403
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does not address whether the coverage should follow the car versus following the person;
therefore, it argues that this court cannot interpret the statute to address an issue that is
clearly not contained therein, and the terms of the policy should dictate.
Shelter further contends that its policy mandates that its coverage is excess under the
facts of this case and as such is in direct conflict with the Farm Bureau policy. Shelter claims
that if there is more than one UM policy applicable to an incident, and those policies cannot
be reconciled, then its policy provides pro rata coverage. Shelter asserts that Farm Bureau’s
argument is that its policy is excess over the Shelter policy because Shelter’s policy is
statutorily deemed primary. Shelter contends that Farm Bureau’s policy coverage is excess
only if the coverage applied to the auto is “primary coverage.” Shelter argues that if Farm
Bureau believed that every policy maintained on the automobile was the “primary
coverage,” the provision in its policy would have stated “excess over any uninsured motorist
coverage which applies to the auto.” Shelter maintains that Farm Bureau’s policy would
not have contained the superfluous language “which applies to the auto as primary
coverage.”
Shelter contends that insurance policies are to be interpreted like other contracts and
are to be construed in their plain, ordinary, and popular sense. Foster, supra. Shelter claims
that the first question to be answered is whether its policy is deemed primary. Shelter argues
that its policy is primary only if there is no other UM policy in existence. It relies heavily
on the approval of its policy language by the Arkansas State Insurance Commission, and it
claims that the general rule is that policy language approved by the Commission has
precedential authority and generally provided with weight when there has been no
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reduction in overall coverage provided to the insured. Shelter Gen. Ins. Co. v. Williams, 315
Ark. 409, 867 S.W.2d 457 (1993).
Shelter contends that Farm Bureau admittedly maintained a policy of insurance
containing UM coverage that was issued to Roberson. Shelter argues that Shelter Mutual,
supra, which was cited by Farm Bureau for the proposition that primary coverage absolutely
rests with the automobile, is distinguishable because the matter there involved an insured’s
attempt to stack underinsured-motorist coverage. Shelter also contends that Shelter Mutual
merely stated that, generally, coverage is placed primarily on the insurer of the automobile,
but it did not set forth that an insured cannot consent to policy language that mandates
coverage be excess or distributed in a pro rata manner with another insurer for the same
accident. Further, Shelter notes that even though it was involved in both cases, it has
changed its policy language since Shelter Mutual, which revolved around Shelter’s
antistacking language. Here, Shelter contends that there is no antistacking language at issue.
Shelter contends that its current policy clearly states that if there is other UM
coverage applicable to the incident, then its coverage is excess. Shelter also contends that
Farm Bureau’s policy maintains that if there is other coverage that is considered “primary”
then its coverage is excess. Shelter argues that, because Farm Bureau did not define the
term “primary,” Farm Bureau is relying on the general proposition that the coverage on the
automobile is generally primary. However, Shelter argues that the UM statute does not
mandate any specific allocation of coverage as the liability statutes require. Further, it argues
that Shelter’s policy language, which mandates that its coverage is not applicable when other
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similar insurance applies to the incident, defeats the general proposition that coverage on
the automobile is “generally” primary.
Farm Bureau contends that the trial court erred in holding that there was coverage
under its policy. We agree with Farm Bureau’s argument that primary automobile-
insurance coverage follows the vehicle, not the person. By reading the applicable statutes
together—Arkansas Code Annotated section 23-89-215 and section 23-89-403(a)(1)—it
can be inferred that the legislature intended that UM coverage, like liability insurance,
follows the automobile because it requires that UM coverage be offered on every liability
policy. Farm Bureau contends that, because the legislature explicitly deviated from the
general rule by providing that no-fault benefits follow the person, see Arkansas Code
Annotated section 23-89-204(b), it is clear that the legislature intended that auto insurance,
other than no-fault benefits, follows the vehicle rather than the person.
In Shelter Mutual, supra, this court considered the question of whether an insurance
policy issued by Shelter prevented stacking of underinsured-motorist coverages. There, the
appellee’s son had died in an automobile accident where he was the passenger, and appellee
sought underinsured motorist coverage from his policy with Shelter. Shelter Mutual, 69 Ark.
App. at 36–37, 9 S.W.3d at 546–47. Shelter denied liability under its policy’s underinsured-
motorist provision that contained an “other insurance” clause barring recovery. Id. at 37, 9
S.W.3d at 547. The question turned on whether the term “primary” contained in the
underinsured-motorist clause was ambiguous. Id. at 41, 9 S.W.3d at 549. Shelter argued
that the term was not ambiguous because it had only one reasonable construction—that, in
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the context of underinsured-motorist coverage, the “primary” coverage is that provided for
the automobile in which the insured was riding. Id. We agreed and stated as follows:
As a fundamental principle of insurance law, under a standard automobile policy,
primary liability is generally placed on the insurer of the owner of the
automobile involved and the policy providing the nonownership coverage is
secondary. 7A AM.JUR.2D Automobile Insurance § 543 (1997). We recognized
this basic rule in State Farm Fire & Cas. Co. v. Amos, [32 Ark. App. 164, 798 S.W.2d
440 (1990)]. Additionally, we note that this “other insurance” clause is contained
within the [underinsured-motorist] endorsement to the policy. Hence, it is clear that
State Farm’s coverage was primary and [Shelter’s] was secondary. Therefore, the only
reasonable construction of this provision of the policy is that it prohibits the stacking
of this coverage with that provided by State Farm to the vehicle in which
[appellee’s son] was riding.
Id. at 41–42, 9 S.W.3d at 550. We agree with Farm Bureau’s contention that the same
logic should apply here.
In its reply brief, Farm Bureau cites First Security Bank of Searcy v. Doe, 297 Ark. 254,
760 S.W.2d 863 (1988), where the Arkansas Supreme Court concluded that Arkansas Code
Annotated section 23-89-403, which provides for UM coverage, expressed the intent of the
General Assembly to include in UM coverage the persons included in liability coverage.
First Security Bank cites with approval Crawford v. Emcasco Insurance Company, 294 Ark. 569,
572, 745 S.W.2d 132, 134 (1988), where the court disagreed with the appellant’s argument
that Arkansas’s UM statute provided for personal insurance as opposed to vehicle coverage;
instead, the court read § 23-89-403 to provide “automobile liability insurance coverage with
respect to the ownership, maintenance, or use of any motor vehicle registered or principally
garaged in this state.” Farm Bureau contends that the Arkansas Supreme Court’s
interpretation of section 23-89-403 is dispositive of this case—that coverage on vehicles
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involved in an accident is primary unless specifically stated by the legislature. As such, Farm
Bureau argues there is no coverage under its policy for this claim.
We agree, and it follows that Shelter insured the vehicle involved in this accident,
and, thus, its policy provided the primary UM coverage available to Roberson. The Shelter
policy provides that if a UM claim is also “covered” by another policy, its coverage is
secondary. Roberson’s claim is not covered under Farm Bureau’s policy because he was
injured in a nonowned auto that had primary coverage. Moreover, the UM claim was
settled for less than Shelter’s limits and, therefore, Shelter’s was the only policy applicable
to Roberson’s claim.
IV. Cross-Appeal
On cross-appeal, Shelter argues that, while the trial court correctly determined there
was coverage under the Farm Bureau policy, it erred in finding that the coverage should be
divided equally instead of by a pro rata distribution as set forth in Shelter’s policy. Because
we have reversed the trial court’s determination that Farm Bureau’s policy provided
coverage for the UM claim, Shelter’s argument on cross-appeal is moot.
Reversed on direct appeal; cross-appeal rendered moot.
KINARD and HIXSON, JJ., agree.
Turner Law Firm, P.A., by: Andy L. Turner and Ben C. Hall, for appellant.
Matthew, Sanders & Sayes, by: Roy Gene Sanders, for appellee.
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